Redefining procurement series: Understanding leadership
Who is responsible and accountable for leading procurement's charge towards the board room?
Change, no matter how small or large, requires some form of catalyst.
A catalyst can occur organically through growth or decline, compliance, competition, technology. A catalyst can also take the form of a dire necessity to overthrow a legacy, break from the old or force a behaviour that has been engrained so deep that to think otherwise is inconceivable.
Whether the catalyst is perceived positively or negatively not only depends on the situation and context in which it was conceived but also the role of leadership behind the catalyst.
From procurement's perspective, the catalyst is very much the need to be seen as a strategic partner of the business - the question is, who should be responsible and accountable to lead this change forward?
Leadership takes many forms and is defined in many ways, however at its core, leadership is 'Organizing a group of people to achieve a common goal' Wikipedia.
If we look at the first part of that definition, organising a group of people, Procurement's influence can and should span the entire business, from front-end to back. Procurement needs to be positioned as a key advisor with any decision to purchase or source (whether direct or indirect). However far too often, procurement is an after thought, being brought in at the end of the project or purchase process by Finance - usually at the negotiation phase - to drive the cost of the deal down further, in which the impact is, in most cases, negligible.
Tim Cummins, President for the International Association for Contract and Commercial Management (IACCM), during a recent interview, added to this:
"I think there has been this challenge that finance often has a somewhat unsympathetic view of the procurement function, and unfortunately the image of procurement in many companies is one of a rather administrative function. I think historically the finance community viewed procurement as useful watch dogs, if you like, ensuring that the business units didn't lose control of their spend and to use procurement to terrorise the supply base and drive out some levels of input price".
Overall this requires an organisation wide behavioural change, which procurement must lead.
Procurement needs to be proactively going to the Finance department and educating them on such things as risk and the value of relationships, such a change takes a great deal of courage "It's a fundamentally different model, and its one that has to be based upon the economic success of a longer term outcome. Such a change needs to be made in a way that will impact performance measurement of the procurement function (moving away from purely PPV) and the partnering between finance and procurement".
We'll talk more about leadership in our next post, but in the meantime - what do you think it takes to be a great business leader?